The Financial Tool That Can Help You Make Smart Decisions

Have you ever gotten this far into the year and thought, “Well, that budget I made back in January is so far off, I might as well toss it out the window!”

If so, you aren’t alone. This is very common for small businesses because one big expense or change in clients can throw your numbers off dramatically.

That’s why the tool we are going to discuss today is so valuable and worthy of your time.

It’s a Budget vs. Actual Report, and it compares what you budgeted at the beginning of the year to the reality of earning and spending. It helps you evaluate how well your initial plan is working, and how to make business decisions going forward.

QuickBooks offers this report. As QuickBooks ProAdvisors, we not only offer this service to our clients, but also can offer you a rolling 12-month Budget vs. Actual Report, which is not available in QuickBooks.

It’s a simple spreadsheet and most of the numbers fill in themselves. Here’s what to include:

• Your line items for income and expenses, just like on your budget
• A column to fill in actual income and expenses
• A column for budgeted income and expenses, copied and pasted over from your budget
• A column for the dollar amount you are over or under budget
• A column for the percentage you are over or under budget

Within a matter of minutes, you can get an important new perspective on your earning and spending.

At first, your Budget vs. Actual Report will bring up questions for you, like why was that expense so much higher than I thought? Or what can I do to bring in more income, since I’m not meeting my target?

This might seem stressful at first, but the important thing to keep in mind is that you’re tracking it, and that’s the first step to improving it.

Here are the benefits of keeping a Budget vs. Actual Report:

• It’s a clear way to measure how well you are meeting your goals. Often, we lose track of goals over the course of the year, but this system makes it difficult to ignore how well you thought you’d be doing in comparison to how well you’re actually doing.
• It tells you where to focus your time and attention. When you see numbers that aren’t what you had planned, those areas might need improvement. Your business management will be more effective because you see what’s lacking.
• It allows you to see the future. Okay, not really. But over time, you’ll get better at predicting where your money is going and coming from and how that compares to your ability to plan.

If you’ve implemented tips from our last blog sticking to a realistic budget , add the step of running a Budget vs. Actual Report to your monthly budget appointment you have set up for yourself.

Once you get in the habit of running this report, it will be an easy task that will give you so much insight. If you want the assistance of a trusted accountant in setting up your Budget vs. Actual Report so you can run it easily month after month, contact us today.